CORPORATE GOVERNANCE IN NIGERIA

Corporate Governance in Nigeria

Corporate Governance in Nigeria

Recent global events concerning high-profile corporate failures have put back on the policy agenda and intensified debate on the efficacy of corporate governance mechanisms as a means of increasing firm financial performance. This study attempts to address this question using pooled ordinary least squares regression analysis for a sample of 93 firms quoted on the Nigerian Stock Exchange for the period 1996-1999.

While making a case for a board size of ten and for concentrated as opposed to diffused equity ownership, the results argue for the separation of the posts of Chief Executive Officer (CEO) and Chair. Moreover, although the results find no evidence to support the idea that boards with a higher proportion of outside directors perform better than other firms, there is evidence that firms run by expatriate CEOs tend to achieve higher levels of performance than those run by indigenous CEOs.

In the main, the results are consistent with existing literature, but there is need to err on the side of caution in any attempt to generalize the findings as the sample selection was determined by the availability of data rather than by any probability criterion. Financial economists have long been concerned with ways to address this problem, which arises from the incongruence of the interests of the equity owners and managers, and have conducted significant research towards resolving it. The literature emanating from such efforts has grown, and much of the econometric evidence has been built on the theoretical works of (Yeboah-Duah 2003 83-108). At the initial levels of the development of the theory of agency, especially as it relates to the firm, concern seemed to focus more on the relationship between the management and shareholders than between them and other categories of stakeholders. The stakeholder theory has of late captured the attention of researchers and a survey of literature on this aspect of corporate finance can be found in the works of (Shleifer and Vishny 2007 737-83). 

According to this theory, the firm can be considered as a nexus of contracts between management on the one hand and employees, shareholders, creditors, government and all other stakeholders on the other. Thus, from the point of view of the stakeholder theory, concern should go beyond the traditional management-shareholder relationship to include all other stakeholders such as mentioned above. The stakeholder theory has undergone some refinements in the work of (Weisbach 2005 431-60), who presents what he terms the “enlightened stakeholder theory”. For him, the traditional stakeholder theory encourages managers to be servants of many masters, with no clear guidance whenever trade-offs (or indeed, conflicts) occur, as they often do.   Exchange, came into being in 1960, but started operations with less than ten stocks in 1961. At age 43 in 2003, the exchange boasted about 200 stocks, quite a remarkable growth rate considering the number at the initial stage, but well below the figure of over 600 in each of the Malaysian, South African and South Korean exchanges.

The discrepancy is even more pronounced with respect to the market capitalization of these other stock exchanges. According to (Weisbach 2005 431-60), as at 1999, the market capitalization for the Nigerian Stock Exchange stood at ...